Thursday’s ECB Decision Could Destroy Europe, If Ukraine Doesn’t First

Finally, September is here! Everything we’ve observed suggest something BIG is on the verge of happening; and frankly, I’m not sure if I’m more excited about the inevitability of the gold Cartel’s demise or terrified of what the ensuing world will look like. This weekend, I saw a chart showing a record low percentage of 16% of Americans believing their children will be more successful than they were, compared to the record high of 56% in 2000. But sadly, financial “success” is likely not going to be the majority’s primary goal in the coming years, compared to survival.

Three years ago, the Cartel commenced the post Labor Day period with the blatant “Operation PM Annihilation I” attacks just hours after the Swiss National Bank devalued the Franc; marking what we deemed the “point of no return” of Central bank efforts to kick the can that last mile. Since then, every conceivable measure of political, economic and social stability has plunged dramatically. And consequently, during this supposedly “quiet” Labor Day weekend, I have witnessed more “horrible headlines” than any before it. Based on 12 years of immersion in the precious metals sector and 25 years in financial markets in general, every ounce of my being tells me the “jig is up” for those attempting to stave off reality with unprecedented money printing, market manipulation and propaganda. Sure, they’ll keep trying – by necessity, exponentially increasing all such deceptions. However, the global pot is on the verge of boiling over – and when it does, if you haven’t yet protected yourself, it will already be too late. Anecdotally, Miles Franklin’s business woke dramatically from its year-long slumber in August, along with its volume of podcast views and blog posts as we head into the year’s traditionally busiest and most fearful season.

Before we get started with today’s primary topic, how could we avoid the most incredible “manipulation news” of our lifetimes – via this weekend’s disclosure that Central banks overtly trade gold and silver futures in the ultra-thinly traded “Globex” overnight markets, as highlighted in last week’s “Sixth Sigma Precious Metals Manipulation Proof.” Even the most cynical observer would admit there is ZERO reason why Central banks would operate in the Globex markets other than price manipulation. And thus, if anyone still operates under the assumption of free precious metal markets, we can only say “trade at your own risk!”

Frankly, even weare awed by how rapidly the global economy is collapsing – which is EXACTLY why unrest is exploding everywhere, and why “leading” Western governments appear desperate to commence population-distracting wars. This week alone, we saw Brazil join the ranks of the recessionary; and just yesterday, we were not only apprised of additional erosion of Chinese manufacturing activity – as history’s largest construction bubble accelerates its implosion – but horrifying European manufacturing data across the board – in the latter case, just in time for Thursday’s all-important ECB meeting, yielding dramatically higher odds that a new $1 trillion QE program will be announced.

Sadly, potentially hyperinflationary monetary policy comes in second place in this weekend’s “horrible headlines” rankings behind the loudly blasting war drums in Iraq, Syria, Libya, Pakistan and the Ukraine. Frankly, I’m not sure if ISIS’s rapidly expanding presence is more threatening to global stability; or the West’s utterly suicidal stand against Russia yielding dramatically rising odds that the rapidly escalating Ukrainian crisis morphs into World War III, if the “ISIS crisis” doesn’t do so first.

To wit, the latter portion of today’s title relates to Europe’s unfathomable proposals to not only kick Russia out of the SWIFT transfer network, but ban the purchase of Russian government bonds. This is from a continent receiving one quarter of its natural gas from Russia – a third of which arrives via Ukrainian pipelines – just three months from the onset of winter. In response, Putin said “messing with” Russia would bring dire consequences – whilst commencing construction of the world’s largest gas pipeline, to China! Amidst such chaos, global sovereign yields plunged to record lows last week – not to mention, the Ruble/dollar exchange rate – revealing not only the “most damning proof yet of QE failure,” but escalating fear of geopolitical turmoil. Thus, to bet on anything other than a worst-case scenario, we believe you are putting your financial lives – and potentially, that of your heirs – in grave danger.

Of course, the former topic refers to Thursday’s potentially world-changing ECB meeting when Goldman Mario may well commence “whatever it takes” to “save” the Euro. Or, more accurately, destroy it. Ironically, his infamous July 2012 promise has put Europe in a dramatically worse economic position – with significantly more debt, significantly higher unemployment, and a significantly higher cost of living despite the “deflationary” propaganda he eschews. Frankly, David Stockman’s view that the European sovereign bond market is a larger bubble than even U.S. Treasuries is difficult to argue with; although even if so, it’s a pretty close race, including Japanese Government Bonds as well.

We have long contended that the Eurozone economic bloc and the Euro currency itself was a failure from day one – with utterly no chance of survival. Created at the turn of the century, amidst the most optimistic – and fraudulent – economic conditions in generations, its foundation was built on sand from the start. And now, 15 years later, the great European experiment is on the verge of collapse. Sadly, the MSM continues to write of how Draghi “saved” the Euro two years ago by promising unfettered hyperinflation monetization, when all he did was buy it a bit more time, in creating perhaps the largest sovereign debt bubble in history – aided by the simultaneous launch of the Fed’s QE3, Japan’s “Abenomics” and China’s most aggressive “social financing” spree to date. To that end, Monday’s issuance of 50-year Spanish government at a comical 4% yield may well mark the beginning of the end of Europe “as we have known it.”

As for Thursday’s meeting, it is unclear whether the ECB will actually pull the trigger on the $1 trillion QE program it has been “preparing” the past three months. However, it is highly likely at least some incremental easing will emerge, with the aforementioned QE program nearly guaranteed by year-end. To that end, Draghi can spout all he wants of “deflationary fallacies” – but in reality, Europeans are spending more to survive than ever, despite record high unemployment, record low economic output, and exploding entitlements provided by insolvent governments with unprecedented, rapidly escalating debts. Not to mention, ones that appear hell-bent on declaring war on Russia.

And by the way, for those that haven’t noticed the Euro’s freefall in recent weeks – along with countless “emerging market” currencies – said “deflation” could rapidly morph into hyperinflation if the ECB accelerates money printing whilst the Fed supposedly reduces its own. Which, in turn, unleashes the vicious spiral of currency debasement we long ago deemed the “final currency war” – as exemplified by Draghi’s ominous geopolitically dangerous comments at the “Jackson Black Hole”…

We have already seen exchange rate movements that should support aggregate demand and inflation, which we expect to be sustained by the diverging expected paths of policy in the U.S. and the euro area.

And thus, as we head into the dangerous month of September, with nearly no silver inventory left on the Shanghai Futures Exchange, similar inventory fears on the CRIMEX and massively PM-bullish charts such as the ones below, we thought it would we suitable to quote David Stockman regarding what we whole-heartedly believe is not only inevitable, but likely imminent.

That (1979 – 1980 skyrocket in gold) will be recorded in the history books someday as simply the warmup for what is likely to occur. The central bank regimes that we’ve had for 20 years, and that have infected the whole world, from the BOE (Bank of England), to the BOJ (Bank of Japan), to the ECB (European Central Bank), the Fed, the People’s Bank of China, and the rest of them, when that regime comes apart, when that regime fails, there is going to be a reset in terms of the way people look at financial values. That’s when we will have another round of flight to gold and other traditional monetary assets (such as silver).

Interestingly you still disparage Armstrong despite him being right on the money. I guess you favour Sinclairs forecast of $2000 gold this year too….Armstrong says ” No way, never” who do you put your money on? You’re as biased as bias gets, and it’s not surprising considering where your income comes from.
Armstrong knows markets go up and down and forecasts accordingly where as you, Sinclair and other gold bugs can only say up, up up, and buy, buy, buy…who is really doing the investment community a favour? Who is really based in reality? Who has the worldwide experience and related computer program’s to accurately forecast capital flows compared to your relatively basic understanding of economics and OPINION? What significant other events have you forecasted with accuracy to within days comparable to Armstrong?
For the record M.A. Has forecasted $5000 gold but it’s not a straight line and it along with a rise in most other asset classes. You despise him because he’s right on gold and it hurts your business and your credibility. I doubt you can refute his latest rant on gold and gold bugs…
I love his comment of people like you and Sinclair insisting you’re right while the market is proving you wrong…classic!

If he had said PMs will fall due to the history’s largest illegal manipulation, he would have been dead on. However, in failing to recognize the most important aspect of the market, he is not worth reading, IMO. Being “right” for the wrong reasons doesn’t make one brilliant.

And by the way, in saying I say gold will go “up, up, up” you completely miss the point of what we say here; which is, gold and silver are to be considered savings, not investments. They have historically protected purchasing power against countless manipulations, and will do so again.

As for other significant events I have forecasted, don’t make me laugh. Everything from the 2000 internet bubble, to the 2007 real estate crash, to the 2002-11 PM explosion, to the exploding money printing and unrest worldwide. And heck, the last three years of massive naked shorting attacks on mining shares.

The only thing I can’t predict is the lengths TPTB will take to manipulate markets for their own benefit; which in the short-term, has been successful (prompting a handful of angry posts like yours), but in the long-term always lose.

I HAVE been right, for the right reasons, about everything except the extent of market manipulation.

Hugo
on September 2, 2014 at 2:21 pm

Hi there Andrew,

I like your and your fellow blogger at Miles Franklin for sure. I agree with your paper (and digits even more) pov.

But what is bugging me is the concept mr Sinclair posted about. The ECB and many other central banks mark their gold to market. The BIS helped to create the EUro and even made sure they added some more gold to their currency and not a fixe the currency price in gold but a floating one. When gold hit 1400 Euro per ounce they had 70ish % of their base currency backed by gold.

That oil gold ratio is also quite interesting if one looks on it over time. Gold is cheap in that ratio. It is well documented that oil always wanted gold in partial payment till the dollar broke with gold. Read the newspapers from back then (smile).

But on the other hand, there is still well over 60k tonnes physical in the ground. What if the fiat, oil and food powers made a deal to get this madness under control so they can do… ok what worse?

Still it seems to me that currencies based off gold instead of the USA tresury are in less worse shape. Do you agree that there are two kind of currencies now? The ones created from the $ and one from gold? I think the gold based have the abiltity, if they destroy paper gold to recapitalise themselfs. After all, turn 100paper:1 ounce on its head…

There are absolutely zero currencies backed by gold, particularly the Euro – and there never will be until the system inevitably crashes. The Swiss Franc was the last, but that was more than a decade ago.

As for oil/gold, just one of millions of indicators to sift through. And given that diesel is the major input to gold production, not “crude oil,” it is far more important IMO.

a

mossmoon
on September 2, 2014 at 4:17 pm

“the inevitability of the gold Cartel’s demise”

I don’t understand this point of view. “The cartel” are western and eastern banking interests. Why do you think the gold is flowing from west to east? Historically a country’s gold had to be pillaged by an army. But these guys are just giving it away for paper? I don’t think so. They’re the same people.

They are not doing so willingly, but MUST do so (covertly) to prevent the inevitable price explosion from destroying confidence (and the value of) the fiat dollar, Euros, Pounds, and Yen that represents their power base.

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